Citigroup, Morgan Stanley Rise on Smith Barney Deal

By Avi Salzman

Morgan Stanley (MS) will buy the rest of Smith Barney from Citigroup (C) after an independent appraiser valued the business at $13.5 billion.

That price is well below Citigroup’s estimates of $22 billion, although it’s higher than Morgan Stanley’s estimate of $9 billion. The Street is viewing the deal as a positive development for both companies this morning, sending shares of Morgan Stanley up 1.6% and shares of Citigroup up 2.5%.

Morgan Stanley will buy Citi’s 14% stake in the joint partnership and receive $5.5 billion in deposits “at no premium.” Morgan Stanley will also buy Citi’s “remaining 35 percent stake in MSSB, inclusive of related deposits of approximately $48 billion, no later than June 1, 2015 at the same implied $13.5 billion valuation. Morgan Stanley has agreed to acquire the next 15 percent stake in MSSB from Citi by June 1, 2013, subject to regulatory approval. The related deposit transfers will be at no premium.”

In a statement, Morgan Stanley CEO James Gorman called the deal a “significant milestone,” while Citigroup CEO Vikram Pandit said “the more we put the past behind us, the more we can focus on our future, which is in the core businesses in Citicorp. Since forming Citi Holdings, we have reduced its assets by over $600 billion, and we will continue to do so in an economically rational manner.”

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There are 2 comments

SEPTEMBER 11, 2012 6:13 P.M.

Eri Zweifel wrote:

A very interesting report on exponentials dangers and the Ponci scheme.Am I to believe our USGovernment
is obvlivious to those perceived threats? I will hope there will be positive influences to to prevent the worst to happen.It is true that everybody will have to be involved to do their part - not just in financial considerations, but to preserve our resources. Therefore the publich at large needs to be informed and not just manipulated.

SEPTEMBER 11, 2012 6:15 P.M.

Eri Zweifel wrote:

A very interesting report on exponentials dangers and the Ponci scheme.Am I to believe our USGovernment
is obvlivious to those perceived threats? I will hope there will be positive influences to to prevent the worst to happen.It is true that everybody will have to be involved to do their part - not just in financial considerations, but to preserve our resources. Therefore the public at large needs to be informed and not just manipulated.

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